Mr. LLC stands there with a shield ready to pro­tect your per­sonal stuff like your home, car, sav­ings accounts, boats, and other things from law­suits and cred­i­tors. If some­one sues you for some­thing Mr. LLC’s employee did and wins the case; if Mr. LLC signs a con­tract with another com­pany and that com­pany sues Mr. LLC for breach of con­tract; if one of the other mem­bers com­mits mal­prac­tice or is per­son­ally neg­li­gent; in all these cases Mr. LLC pro­tects your per­sonal stuff. Mr. LLC can be your best pro­tec­tor and defender.

This is pretty pow­er­ful stuff, but Mr. LLC can’t pro­tect you from every­thing. There’s this big mis­per­cep­tion that if you set up an LLC you auto­mat­i­cally have all this super-powered pro­tec­tion from all law­suits. That’s not true. You’re still liable for your per­sonal mis­con­duct. That’s why it’s always good to talk with your insur­ance agent to get insurance.

There’s another thing that Mr. LLC can’t pro­tect you from and that’s dis­putes between mem­bers or between mem­bers and man­agers. Once again it’s a good idea to talk with your insur­ance agent about this. You’ll also want to include some sort of dis­pute res­o­lu­tion pro­ce­dure in your oper­at­ing agree­ment to help resolve these disputes.

You’ll also find that unless your LLC is finan­cially sound, your bank, land­lord, and oth­ers will require you to sign a per­sonal guar­an­tee. This allows that per­son to seize your per­sonal assets to pay off your LLC’s debts.

Over­all Mr. LLC is pretty pow­er­ful, but I wouldn’t call him super­man. Sorry Mr. LLC.